13th October 2008
Week Just Gone
Despite the US bailout plan being passed, European markets were heavily sold off as soon as the markets opened last Monday morning. This set the tone for the week, as no matter what was tried, indices fell. A UK bailout plan was announced on Wednesday after their banking shares collapsed the previous day. Later that day, world central banks announced a co-ordinated ½% cut in interest rates. But nothing could inspire confidence in the plummeting markets.
All the major indices had five straight losing days, with no mini-rally lasting longer than a couple of hours. The Dow Jones lost a jaw-dropping 19.75% to close at 8294. That is 41.57% lower than its peak exactly one year ago. The FTSE collapsed 15.60%, the German DAX shrunk 18.28% and the French CAC dived 17.27%.
FX
The European banking crisis and inevitable future rate cuts resulted in the Euro and Sterling weakening against the US Dollar last week. EURUSD lost 2.83% and GBPUSD shed 3.90%, with most of those loses sustained on Monday. EURGBP rose 1.1% to 0.7861.
Commodities
The price of Brent Crude Oil continued to fall last week as it becomes clear that global demand will fall heavily in this downturn. It finished the week down 14.44% at 76.52. Gold benefited from a “flight to safety” early in the week, but its name was added to the list for sell-off on Friday, falling 7.4% that day. The precious commodity finished up a mere 0.88% at 844.2 on the week.
Corporate
RBS, Lloyds TSB, HBoS and Barclays had a very tough week as funding worries and potential government takeover sent their share prices tumbling. RBS fell 40% on Tuesday and finished the week 60% lower.
Iceland’s banking system dramatically collapsed last week under the strain of the global financial crisis. Their top three banks were nationalised and trading on their stock exchange temporarily suspended.
Week To Come
The Irish budget is on Tuesday. Traders will be watching for any moves that may prop up the economy. Consumer inflation numbers will be released throughout the week: UK (Tuesday), Eurozone (Wednesday) and the US (Thursday). On Wednesday, US retail sales figures for September are out.
There are a whole host of earnings reports due this week as US earnings season kicks into top gear. Traders will want to see how the economic slowdown has hit company’s profits. Intel, eBay and Google will be keenly watched.
Monday
Tokyo market closedEconomic Indicators
UK: 09.30 Producer Price Index
EU: 07.45 French Current Account
Results
IRE: 11.00 Waterford Wedgwood EGM
Tuesday
Economic Indicators
UK: 09.30 Consumer Price Index, 09:30 Retail Price Index
IRE: 15.45 Budget
EU: 08.00 Spanish Consumer Price Index, 09.00 Italian Consumer Price Index, 10.00 Zew Survey, 11.00 Eurozone Industrial Production
US: 12.45 ICSC-UBS Retail Chain Store Sales, 13.55 Redbook, 14.00 TIPP Economic Optimism
Results
US: Altera, Genentech, Intel, Johnson and Johnson, PepsiCo
Wednesday
Economic Indicators
UK: 09.30 Average Earnings, 09.30 ILO Unemployment Rate
EU: 07.00 German Consumer Price Index, 07.45 Spanish Consumer Price Index, 10.00 Eurozone Consumer Price Index
US: 12.00 MBA Mortgage Applications, 13.30 Retail Sales, 13.30 Producer Price Index, 13.30 New York Empire Manufacturing Index, 15.00 Business Inventories, 15.35 Oil Inventories, 18.15 Feds Bernanke Speaks, 19.00 Beige Book
Results
EU: Suedzucker
US: Abbott, AMR, Delta Air Lines, eBay, JPMorgan Chase, Wells Fargo, Xilinx
Thursday
Economic Indicators
IRE: Public Sector Employment and Earnings
EU: 09.00 Italian Trade Balance
US: 13.30 Jobless Claims, 13.30 Consumer Price Index, 14.15 Capacity Utilization, 14.15 Industrial Production, 15.00 Philadelphia Fed Survey, 15.35 Gas Inventories, 18:00 NAHB Housing Market Index, 21.30 Money Supply
Results
US: Advanced Micro Devices, Baxter International, Capital One Financial, CIT Group, Citigroup, Continental Airlines, Google, Merrill Lynch, Southern, Southwest Airlines, Stryker, United Technologies
Friday
Economic Indicators
EU: 10:00 Eurozone Trade Balance
US: 13.30 Housing Starts, 13.30 Building Permits, 15.00 University of Michigan Consumer Sentiment Index
Results
There are no company results today.
Press Roundup
In the Irish Independent, former Bank of Ireland chief executive Mike Soden is calling for Bank of Ireland to merge with Allied Irish Bank to create a “national champion” in a bid to stave off a banking meltdown.
The Irish government used its €500 billion guarantee for the banking sector to ensure the banks passed on last week’s ½% European Central Bank rate cut in full to homeowners, according to the Sunday Business Post.
The Mail on Sunday reports the IMF warning that markets could yet crash by another 20% as the “world is on the brink of complete financial meltdown.”
The Telegraph reckons that Morgan Stanley and Goldman Sachs, the last remaining independent investment banks, may receive cash injections from the American government as part of Treasury Secretary Henry Paulson’s plan to buy stakes in financial institutions.
The Scotland on Sunday talks about the potential merger deal between American car giants General Motors and Chrysler, as the industry is suffering colossal sales falls.
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